Southgobi Resources : Announces the Second Quarter 2017 Results

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited ("Hong Kong Stock Exchange") take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

南戈壁資源有限公司*

(A company continued under the laws of British Columbia, Canada with limited liability)

(Hong Kong Stock Code: 1878) (Toronto Stock Code: SGQ)

HONG KONG - SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878) (the "Company") today announces its financial and operating results for the three and six months ended June 30, 2017.

Please see the attached announcement for more details. The information per the attached announcement is available on the SEDAR website at www.sedar.com and the website of the Hong Kong Stock Exchange at www.hkexnews.hk.

By order of the Board

SouthGobi Resources Ltd.

Mr. Aminbuhe

Chairman

Hong Kong, August 14, 2017

As at the date of this announcement, the executive directors of the Company are Messrs. Aminbuhe and Yulan Guo; the independent non-executive directors are Messrs. Yingbin Ian He, Zhu Liu and Mao Sun and Ms. Jin Lan Quan; the non-executive director is Mr. Wen Yao.

* For identification purposes only

August 14, 2017

HONG KONG - SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878) (the "Company" or "SouthGobi") today announces its financial and operating results for the three and six months ended June 30, 2017. All figures are in U.S. dollars ("USD") unless otherwise stated.

SIGNIFICANT EVENTS AND HIGHLIGHTS

The Company's significant events and highlights for the three months ended June 30, 2017 and the subsequent period to August 14, 2017 are as follows:

• Operating Results - As a result of improved market conditions and prices for coal in the People's Republic of China ("China"), the Company's operating results for the quarter improved with an increase in the average selling price of coal as well as the volume of coal sales, as compared to the second quarter of 2016. The Company sold 1.48 million tonnes of coal product during the second quarter of 2017 as compared to 0.82 million tonnes for the second quarter of 2016. The average realized selling price increased from

  $13.65 per tonne for the second quarter of 2016 to $25.24 per tonne for the second quarter of 2017, which was mainly a result of improved market conditions as well as an improved product mix.

• Financial Results - The Company recorded a gross profit of $7.3 million during the quarter compared to a gross loss of $12.7 million in the second quarter of 2016. The Company recorded a $0.9 million profit from operations during the second quarter of 2017, as compared to a $13.8 million loss from operations in the second quarter of 2016. Revenue was $34.7 million in the second quarter of 2017 as compared to $10.4 million in the second quarter of 2016. The operations during the second quarter of 2017 improved over the comparative 2016 quarter given the improved market conditions in China.
• China Investment Corporation ("CIC") Convertible Debenture ("CIC Convertible Debenture") - On June 12, 2017, the Company executed a deferral agreement (the "June 2017 Deferral Agreement") with CIC in relation to a revised repayment schedule on the $22.3 million of cash interest and associated costs originally due on May 19, 2017 (the "May 2017 Interest Payable"). The key repayment terms of the June 2017 Deferral Agreement are: (i) the Company is required to repay on average $2.2 million of the cash interest and associated costs monthly during the period from May 2017 to October 2017; and (ii) the Company is required to repay $9.7 million of cash interest and associated costs on November 19, 2017. The Company will pay a deferral fee at a rate of 6.4% per annum in consideration of the deferral.
• Settlement of Lawsuit Notice from a Former Fuel Supplier - On January 20, 2017, SouthGobi Sands LLC ("SGS"), a subsidiary of the Company, received a notice from the Khan-Uul District Civil Court of First Instance in Mongolia (the "DC Court") in relation to a claim for damages from Magnai Trade LLC ("MTLLC"), a former fuel supplier of SGS, in the aggregate amount of MNT 22.2 billion (approximately $8.9 million) representing outstanding fuel supply payments and related penalties and interest costs. On January 25, 2017, the DC Court dismissed the litigation and the matter was referred to arbitration. The Company signed a settlement agreement with MTLLC on February 10, 2017, pursuant to which SGS would pay MTLLC $8.0 million in equal monthly installments from March 2017 to June 2017 in full satisfaction of the debt outstanding. The terms of the settlement agreement was subsequently acknowledged by the arbitrator in the arbitration award.

On June 30, 2017, the Company signed a triparty settlement agreement (the "Triparty Settlement Agreement") with MTLLC and ICIC LLC ("ICIC") (an independent fuel supplier of the Company), pursuant to which: (i) MTLLC transferred to ICIC its rights to receive payment from the Company for the outstanding balance of approximately $6.3 million owing under the settlement agreement (the "Outstanding Amount") and its right to enforce the arbitration award against the Company; and (ii) the Company and ICIC agreed to a revised payment schedule for repayment of the Outstanding Amount. Pursuant to the Triparty Settlement Agreement, the Company shall pay interest on the Outstanding Amount which shall accrue at a monthly rate of 1.8% and will be settled on a monthly basis. The Company is required to repay on average $1.3 million monthly during the period from July 2017 to November 2017.

To date, the Company has made all payments due under the Triparty Settlement Agreement.

• Settlement of Trade Receivable - During the year ended December 31, 2016, the Company entered into a settlement agreement with one of its major customers (the "Customer") pursuant to which 200 residential units and 40 parking spaces (collectively, the "240 Units") located in Ulaanbaatar, Mongolia, were transferred to the Company as partial consideration for settling outstanding trade receivables in the amount of $12.0 million owing by the Customer to the Company, with the balance of the receivable, totaling $7.5 million, payable in cash by the Customer to the Company. As of the date of this announcement, the entirety of the $7.5 million balance has been repaid by, and collected from, the Customer.

• Changes in Directors

  Mr. Yingbin Ian He: Mr. He was appointed as an independent non-executive director on May 16, 2017.

  Mr. Wen Yao: Mr. Yao was appointed as a non-executive director on May 18, 2017.

  Mr. Aminbuhe: Mr. Aminbuhe was appointed as Chairman of the Board immediately following the Company's Annual General Meeting (the "AGM") held on June 30, 2017.

  Mr. Ningqiao Li: Mr. Li did not stand for the re-election at the AGM and ceased to be an executive director and the Executive Chairman of the Board on June 30, 2017.

  Mr. Joseph Belan: Mr. Belan did not stand for the re-election at the AGM and ceased to be an independent non-executive director on June 30, 2017.

  Mr. Huiyi Wang: Mr. Wang resigned as a non-executive director on July 24, 2017.

• Strategic Advisory Board - In light of the reconstitution of the Board and appointment of new directors, the Company's Strategic Advisory Board was dissolved on June 30, 2017.